Policy Issuance 4-97

July 10, 1997

Subject: Conversion of Coverage for Residential Timeshare Condominiums to the Residential Condominium Building Association Policy (RCBAP)

Background: Policy Issuance 6-96, issued on August 7, 1996, clarified the coverage provided by the NFIP for timeshare buildings. It was determined that timeshare buildings in the condominium form of ownership where at least 75% of the area of the buildings is used for residential purposes are residential condominium buildings and thus are eligible for coverage under the RCBAP.

A question has arisen as to whether all residential timeshare condominiums insured under the General Property Policy must now be insured under the RCBAP.

Policy Statement: This is to clarify that residential timeshare buildings in the condominium form of ownership must be insured under the RCBAP. Residential timeshare condominiums, with NFIP coverage in effect under the General Property Policy on the date of this issuance, must convert to coverage under the RCBAP by the end of the current policy year or December 31, 1997, whichever is later. Residential timeshare condominiums with coverage newly written under the General Property Policy after the date of this issuance and before January 1, 1998, have until December 31, 1997, to convert to coverage newly written after December 31, 1997, must be written under the RCBAP.

If a loss occurs to a residential timeshare condominium building insured under a General Property Policy (i.e., not yet converted to a RCBAP) before the required conversion date, it will be adjusted based on the policy as written. This means the claim payment will be made based on the limits of coverage written and subject to all provisions of the General Property Policy.

If a flood loss occurs to a residential timeshare condominium building after the required conversion date and it is still insured under the General Property Policy, the policy will be reformed to a RCBAP with the amount of coverage purchased under the General Property Policy. If additional premium is due, the reformation provisions of the policy will apply and the insured will have 30 days from the date of notice of the additional premium due to submit the premium. If the premium is not received within the 30-day period, coverage will be reduced to the amount that the premium already paid for the General Property Policy will buy at RCBAP rates. There will be no right to increase the amount of coverage above the amount purchased under the General Property Policy to cover the loss. All the provisions of the RCBAP will apply including the co-insurance provision.

Examples:

  1. One-year policy term effective May 1, 1997, to May 1, 1998; the policy must be converted to a RCBAP no later than May 1, 1998.
  2. One-year policy term effective October 1, 1997, to October 1, 1998; the policy must be converted to a RCBAP no later than December 31, 1997.
  3. Three-year policy term effective May 1, 1996, through May 1, 1999; policy must be converted to a RCBAP prior to the end of the current policy year of May 1, 1997, to May 1, 1998.
  4. Three-year policy term effective October 1, 1996, through October 1, 1999; policy must be converted to a RCBAP no later than December 31, 1997.

Last Modified: Wednesday, 24-May-2006 12:05:02 EDT